PUBLIC LAW 109–280—AUG. 17, 2006
120 STAT. 1073
organization have directly or indirectly held an interest in the contract (whether or not at the same time). ‘‘(B) EXCEPTIONS.—Such term shall not include a life insurance, annuity, or endowment contract if— ‘‘(i) all persons directly or indirectly holding any interest in the contract (other than applicable exempt organizations) have an insurable interest in the insured under the contract independent of any interest of an applicable exempt organization in the contract, ‘‘(ii) the sole interest in the contract of an applicable exempt organization or each person other than an applicable exempt organization is as a named beneficiary, or ‘‘(iii) the sole interest in the contract of each person other than an applicable exempt organization is— ‘‘(I) as a beneficiary of a trust holding an interest in the contract, but only if the person’s designation as such beneficiary was made without consideration and solely on a purely gratuitous basis, or ‘‘(II) as a trustee who holds an interest in the contract in a fiduciary capacity solely for the benefit of applicable exempt organizations or persons otherwise described in subclause (I) or clause (i) or (ii). ‘‘(3) APPLICABLE EXEMPT ORGANIZATION.—The term ‘applicable exempt organization’ means— ‘‘(A) an organization described in section 170(c), ‘‘(B) an organization described in section 168(h)(2)(A)(iv), or ‘‘(C) an organization not described in paragraph (1) or (2) which is described in section 2055(a) or section 2522(a). ‘‘(e) TERMINATION.—This section shall not apply to reportable acquisitions occurring after the date which is 2 years after the date of the enactment of this section.’’. (2) CONFORMING AMENDMENT.—The table of sections for subpart B of part III of subchapter A of chapter 61 is amended by adding at the end the following new item: ‘‘Sec. 6050V. Returns relating to applicable insurance contracts in which certain exempt organizations hold interests.’’.
(b) PENALTIES.— (1) IN GENERAL.—Subparagraph (B) of section 6724(d)(1), as amended by this Act, is amended by redesignating clauses (xiv) through (xix) as clauses (xv) through (xx) and by inserting after clause (xiii) the following new clause: ‘‘(xiv) section 6050V (relating to returns relating to applicable insurance contracts in which certain exempt organizations hold interests),’’. (2) INTENTIONAL DISREGARD.—Section 6721(e)(2) is amended by striking ‘‘or’’ at the end of subparagraph (B), by striking ‘‘and’’ at the end of subparagraph (C) and inserting ‘‘or’’, and by adding at the end the following new subparagraph: ‘‘(D) in the case of a return required to be filed under section 6050V, 10 percent of the value of the benefit of any contract with respect to which information is required to be included on the return, and’’.
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